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Joint Venture Advantages and Disadvantages

Joint Venture Advantages and Disadvantages

Joint Venture Advantages and Disadvantages

What is a Joint Venture?

Possibly your first question will be “What is a joint venture?” and then possibly “How is that different from a partnership?”. And yes, it is commonly referred to as a “JV”, but first question first.

A joint venture is an alliance between parties for mutual benefit. Still doesn’t really explain things, does it?

Where different companies that might not even be in the same industries see an opportunity to work together for mutual benefit without giving up any of their core business, that is a joint venture.

Joint Ventures are usually for a specific and limited project, goal or purpose and may also be limited by time. They allow each of the parties to leverage the resources, technology, finance or markets of other parties, for mutual benefit.

Property developments are often completed by joint ventures, where each party contributes different resources or expertise to complete the project. One party might have all the knowledge necessary to set up, manage and complete the project, another party might own the land and the third party might be a builder. By forming a joint venture, they all limit their risks to the areas where they have knowledge and experience and get to participate in a project that would otherwise be out of their league.

Telecommunications companies might form joint ventures to construct and use infrastructure that is costly to build and maintain and would otherwise be underutilised. They each gain access to a necessary resource, but at a reduced cost.

Its also common for joint ventures to form between foreign companies wanting to break into a new market where there is an allied provider who already has their customers in that territory. Consider a home and contents insurance company that teams up with a car insurance provider in a market where they don’t currently have a foothold, being able to increase the variety of insurance products offered to the car insurer’s customer base.   

Joint ventures can involve more than two parties and can involve different types of entities, such as a mix of individuals, companies and trusts. There is no specific formula. Some joint ventures are formed by contract and some are formed as companies where each joint venture party owns shares. An incorporated joint venture is more likely to become a saleable asset in the future than an unincorporated joint venture.

Famous Joint Ventures You Might Not Have Heard About

Some recent international joint ventures include the following:

Haven – This health care focused joint venture was formed in 2018 between Amazon, Berkshire Hathaway and JPMorgan Chase. Think about the benefits each party might be contributing to the venture. Amazon has amassed huge amounts of data on consumer spending and is increasing its data collection into our homes with Alexa and Amazon Prime. Berkshire Hathaway has been around for 180 years accumulating incredible knowledge and experience in operating successful businesses and understanding market changes. JPMorgan Chase is an investment bank. The stated goal of Havel is to simplify insurance benefits, improve healthcare services and reduce the cost of health care services and prescription drugs.  

Self-driving cars – Google’s Waymo self-driving division has joint ventured with Jaguar Land Rover and Chrysler rather than building cars themselves and the car manufacturer doesn’t have to start its self-drive tech from scratch. Volvo and Uber, Honda and General Motors’ Cruise Unit and most recently, Hyundai and Aptiv have teamed up, all for similar reasons. Predictions are that the motor vehicle industry will be dominated by tech companies in the not too distant future.

Cosmotec – is a joint venture between the Sumitomo Corporation Group and a Brazilian based cosmetics company, with a view to gaining access to one of the world’s largest cosmetics markets.

Joint Venture Examples

For small business we see a lot of joint ventures where parties collaborate to develop a product or service they couldn’t offer on their own. Some very common joint ventures include collaborations between:

  • software developer + industry expert
  • web or app developer + industry expert
  • digital marketers + tradies
  • digital marketers + professional services
  • digital marketers + any business that needs leads
  • salesperson + any business that needs to convert leads
  • professional onboarding or training + any business with a high demand for bringing on new staff
  • international company + local distributor
  • industry expert + allied industry expert
  • property owner + property developer
  • financier + any business needing capital

We’ve already talked about some joint venture examples, so perhaps we should also look at the characteristics of a joint venture, or examples of the kind of provisions you’d expect to see covered in a joint venture agreement.

Governance/ Setup

  • there is usually a joint venture agreement setting out each party’s rights and obligations, as well as what will happen to any venture assets at the end of the project
  • the proportionate interests of the parties are described in the joint venture agreement, sometimes 50/50 and sometimes a different proportion
  • the joint venture agreement should set out how decisions will be made and any deadlocks broken and also provide for prompt dispute resolution to avoid holding up the project

Control

  • each party has a proportionate interest in the revenue or profits of the joint venture, but that may be different from their level of authority in decision making – investment partners are sometimes silent partners to a joint venture, meaning they don’t have a say in how the project is conducted
  • each party to a joint venture continues to control and operate their own business independently to the project
  • transactions may be recorded separately by the parties involved and invoiced back to the venture, or accounts will be maintained so that each of the joint venture parties can separately account for their contributions and any distributions they receive

Termination

  • what happens to the assets of the venture, particularly intellectual property when the project ends?
  • are the parties restrained from competing with the joint venture for a period?

What is the Difference Between a Joint Venture and a Partnership

Partnerships are generally long-term whole of business ventures whereas joint ventures are often project specific side gigs. In a partnership you also agree to take full responsibility for the partnership liabilities, whether you created them or not, and even if you didn’t know they were created by one of the other partners.

We generally discourage people from calling a party a joint venture partner or calling their venture a joint venture partnership. In fact, we prefer joint venture and partnership not to be mentioned in relation to the same project.

Some comparisons between a joint venture vs partnership

Benefits of a Joint Venture

The benefits to a party in a joint venture will depend upon their goal in entering the arrangement in the first place. Some common benefits of joint ventures include:

  • business diversification
  • entry into new markets
  • new distribution channels
  • leverage expertise of another party
  • flexibility
  • limited scope
  • defined risks
  • defined rewards
  • potential to create saleable asset
  • reduced costs
  • economy of scale
  • strategic information sharing

Risks of a Joint Venture

One of the scariest parts of going into a joint venture for small business owners is that the other party won’t be as committed to the project as you are, and you end up doing everything yourself. We’ve seen it happen.

One of our digital marketing clients stopped joint venturing when they realised that they were doing everything for the venture and the other party was sitting back and doing nothing. Our client had the team and the methodology and the impatience to get things moving, but each joint venture became a project where they should have simply been paid for their digital marketing services and ended the relationship after delivery. While we were able to exit them from all agreements without too much fall out, it put their business back 12 months and impacted their revenue goals.

Your main risks are the same as any business venture, loss of time, loss of money, loss of trade secrets or other intellectual property, loss of staff and reputational risk. Weigh up the benefits against the risks, mitigate your risks and consider your options. 

How can Onyx Legal help you?

Joint ventures have a contractual foundation.
You can form a joint venture with a handshake, or you can put a little thought into your expectations and negotiate an agreement that clearly sets out each party’s rights and obligations, as well as exit opportunities. Download our Joint Venture Questionnaire here. We also highly recommend incorporating sensible dispute resolution mechanisms that will support the joint venture moving forward. If you are already in a joint venture, we can review the contract and clarify any legal rights and obligations you don’t understand.

Contracts don’t have to be in Writing to make them Binding

Contracts don’t have to be in Writing to make them Binding

Contracts don’t have to be in Writing to make them Binding

Not all contracts are in writing, and they don’t have to be

A contract, in its most basic form, is an agreement between parties that legally binds them. Even without a handshake to seal it.

People bind themselves to contracts every day, sometimes without even realising it, and as a result also acquire certain legal rights and responsibilities.

It is commonly thought that a contract can’t be binding unless it is put in writing. While this is true in some cases, generally speaking – unwritten contracts ARE enforceable.

There are only a very small number of contracts that have to be in writing – like the sale of land.

You can form a contract through an exchange of emails or private messages, through a telephone call or a combination of those activities. It is helpful to think of a contract as a bargain and when a dispute arises, the law aims to determine whether or not the bargain made can be enforced.

So whether a bargain is based on a verbal agreement, written agreement or a combination of the two, remember that actions can speak louder than words. However, its the written words you will want to rely on if something goes wrong.

It is always wise to write down the details of an agreement, especially if large sums of money are involved and where there are no reliable witnesses or other evidence of the details. I’ve seen business partners waste all of their profits in legal disputes because they didn’t put their agreement in writing 10 years earlier while they were still friends. The beauty of having something in writing is for reference, when people have forgotten the details, or remember different things.

 

Making a Contract

A contract must have three identifiable features, whether it is written, verbal or partly verbal and partly in writing:

  1. Agreement (offer and acceptance)
  2. Intention
  3. Consideration

A contract is formed when there is an agreement between the parties to undertake certain obligations.

Agreement

The point at which negotiations have been concluded and the agreement is reached is not always easily worked out, but there must have been a clear indication (offer) by one party of a willingness to be bound on certain terms and an unqualified acceptance of that offer.

‘Unqualified’ means that it shouldn’t be subject to conditions. Anything subject to conditions is not acceptance, it is further negotiation. This is where counter-offers and acceptance can become confused.

If you offer to sell 1800 widgets at $40 each, with a discount of 30% for volume, and the buyer says ‘okay, I’ll take 600 at the discounted price‘, then the buyer has made a counter-offer, not accepted your original offer. You may not agree to that level of discount at the reduced volume.

There are legal cases debating the point at which agreements are eventually reached, and whether or not an agreement was even made.

Intention

For there to be a legally enforceable contract the parties must have intended to enter into a legally binding agreement.

Intention is seldom something you say out loud, but is usually inferred from the circumstances surrounding the agreement.

This is where the bet in the pub becomes the primary example. Someone making an off-hand bet is unlikely to be serious.

Another good example is where someone promises something you know they simply can’t deliver – for example ‘I’ll give you a million bucks if you …‘ when you know the person simply doesn’t have that money to spare.

Consideration

Before there can be a contract there must be an agreement to exchange. Each party must provide something in return for what the other is providing. The item or action exchanged is called the consideration.

It does not matter if the consideration given by each side is of unequal value. The law requires only that something is given by each party.

So consideration can be money, or actions, or property. Swapping items (like sports uniforms at international sporting events) is treated no differently than money being exchanged for an item.

Donations are not the same thing. Only one party has the benefit of a donation, so a pledge to donate is usually unenforceable. However, where something is offered in exchange for a donation – like a red nose, or a yellow daffodil – then that may be sufficient consideration to create a binding contract.

Nominal consideration is usually enough. So when a seller says you need to pay a substantial deposit to secure the deal, their actions may be capable of being considered misleading. There are many cases where $1, or similar small amount have been found to be sufficient to secure a deal.

Signing a Contract

You should also be aware that a contract or agreement need not necessarily be signed to be enforceable. The circumstances surrounding the contract can be enough to demonstrate that something in writing has accurately set out the parties’ intentions. A signature is usually relied upon as evidence that a person has read the document and agrees to be bound by its terms, but clicking an ‘I agree‘ check box on an electronic form or web page can have the same effect.

A person who signs a contract or click a check box is generally bound by any terms it contains regardless of whether they have read the document, and legislation like the Electronic Transactions Act 1999 (Cth) allows for that.

It was commented in the explanatory memorandum that ‘An addressee who actually knows, or should reasonably know in the circumstances, of the existence of the communication should be considered to have received the communication. For example, an addressee who is aware that the communication is in their electronic mail ‘box’, but who refuses to read it should be considered to have received the communication.

Despite this rule, in some circumstances a person may still be able to withdraw a contract, start a court action to enforce it, or apply to a court to have the contract voided.

These are technical legal arguments that generally only arise at the point of dispute.

Remember, if you do find yourself in a dispute, the enforceability of an agreement or contract will depend on what law applies. For example – people buying or selling products or services online could be anywhere in the World. The law in Victoria, Australia is not the same as the law in Singapore. Different rules apply, not to mention different courts. But that is a conversation for another day.

The final word on Contracts

Contract law can be extremely complex, and there are different nuances in all legal systems. Look at the type of contracts you are entering into and consider the risks involved in doing so.

If you plan on entering into a deal that is worth more than you can afford to lose, then it is highly advisable to invest in legal assistance to ensure the point of agreement, and the terms of the agreement are clear. If the contract doesn’t make sense to you, how do you know what deal you are getting involved in?

We’re happy to assist you with a short advice, a quick review or drafting a whole new contract.

How can Onyx Legal help you?

Let us help you craft a contract that suits your business. With a written contract, you have a clear record of what is agreed rather than having to rely only on memory. Contact us to draft your agreements.

Types of Contracts

Types of Contracts

Types of Contracts

Types of Contracts in Business

Sometimes the type of contract you are looking for in business is not the type of contract you need.

Just this last week I had a client come to me with a template contract they had downloaded, and a business proposal they wanted to pursue. The problem was, the type of contract they had downloaded was a partnership agreement, and it really wasn’t suitable for what they wanted to achieve.

You see, a partnership agreement creates all sorts of interesting obligations on the people involved and is really only suitable for a long-term collaborative business and not for the development of a side hustle or project. Traditionally legal, accounting and medical practices were set up as partnerships. In a partnership, you can become personally liable to pay for the obligations of the business, even if you didn’t know they had been created. In a professional partnership, if someone takes off with client money, the other partners can be made to replace those funds, even though they did nothing wrong. Not the type of contract you want for a short-term collaboration.

For a side hustle, or collaboration to develop a digital product like an App, or a live product like a training program, or a physical product like an artificial hand, you are looking to create a joint venture. So, the type of contract your after will be different from a partnership agreement and can keep the obligations of the parties separate.

There are all sorts of different types of contracts, and downloadable template might cover what you need, but it also might not. We like to work with our clients to identify the solution they are looking for and then craft a document to fit, rather than assuming your business is just like everyone else’s.

Here are some of the variables in different types of contracts:

Written, verbal or partly written and partly verbal contracts

Contracts don’t necessarily need to be in writing to be binding. You might have created a binding contract simply through a video conference, an exchange of messages on a platform like Slack, or a combination of emails and phone calls.

The beauty of having a written contract is keeping a record of what you agreed in the first place, so that if any questions arise a year down the track, you can check back and see how you covered off that scenario.

There are definitely some contracts that do need to be in writing to be binding. A type of contract you might have come across in business is a personal guarantee. Personal guarantees do need to be in writing, and properly signed to be enforceable.

Standard form contracts

Love them or hate them, standard form contracts are designed to help make business easier for everyone, not harder. At least, they should be designed to make business easier.

As a business owner, its time consuming and unproductive to create unique contracts every time you deliver the same product or service. Standard terms give you a level of comfort so that you are clear on your obligations, and your expectations of your customer, every time you complete a similar transaction.

For customers, if standard terms are easy to understand, they know what to expect each time they deal with you. Just keep in mind that a standard form contract can still be open to negotiations. You need not lose a customer just because they don’t like your standard terms. You can be flexible, and we can help you with that.

Click-wrap contracts

You might not pay too much attention to all the ‘I agree’ check boxes you find online, but perhaps you should. Each time you check one of those boxes, you are entering into a contract, whether you read the terms or not.

There have been court decisions where people have protested that they should not be bound by terms attached to check box because they didn’t read them. The courts have, to date, been in favour of pointing out that you had the chance to read them, and if you didn’t take that chance at the time, that is your responsibility and your problem.

Click-wrap contracts are simply standard form contracts that you agree to electronically, although they are generally not negotiable. The more action you have to take to give agreement, such as not being able to agree until you have scrolled through all of the terms, can support an argument that they should be binding. 

Doing business online is a convenience for everyone, and the volume of transactions that can be processed that way, and the variety of products and services you can access online, means it’s not unreasonable for a business to suggest you agree to their contract terms, or go elsewhere.

Website Terms and Conditions

Terms and conditions on a website may or may not be binding, depending on the circumstances. If you hide them away where they are hard to find (and I have seen a retail website do this) then they are unlikely to be binding. Courts are particularly interested in whether a consumer or purchaser has had the opportunity to read them first. 

The severity of any provision in your terms and conditions will make a difference too. For example, if a website owner is attempting to say that just by browsing the information on the website without any further action, you are liable to pay $100, then that is not going to be enforceable because you haven’t had a chance to become aware of that term without first accessing the website. 

Remember too, that trying to impose new terms and conditions retrospectively is not going to work either. If something happens and you change your website terms, the updated terms will only be binding on users after the update, and not before. This is one reason to keep “last updated” dates on your website terms, and a record of historical documents.

Purpose of a Contract

The purpose of your contract is likely to influence how it is structured.

If you want something from someone, the contract will be structure to achieve that, and if someone wants something from you, the contract will be structured differently.

We had prepared a contract for a client’s business to meet their needs. They received feedback from a business consultant (not a lawyer) that they could save money and simply copy the consultant’s contract and it would be fine.

It wasn’t.

The client was good enough to send us the consultant’s contract with his feedback.

Our client wanted to employ contractors so that they could expand the area where they delivered services. Things like the protection of their intellectual property and the quality of service delivery were really important to them. We wrote the contract to fit.

The consultant’s contract was written to favour the way he delivered services to people and protected his interests, including limiting his responsibility for the services he delivered.

That was the opposite of our client’s needs.

They needed their contractors to be responsible for the services delivered, and to fix problems promptly if they arose. If they had copied the consultant’s contract, they would not have been able to demand the level of quality they needed from their contractors.

Not all Contracts are Legal

It is worth keeping in mind that not all contracts are legal. A contract that amounts to human slavery is not going to be enforceable. A bet between mates in the pub is unlikely to form a binding contract. Contracts between businesses might include terms that heavily favour the stronger party, and those terms might be open to challenge as ‘unfair contract terms’ at law.

How can Onyx Legal help you?

If you are not sure what type of contract you are looking for, book a short advice session with us so we can help you work out what you need and give you peace of mind.

Is a scanned Contract legally binding in Australia?

Is a scanned Contract legally binding in Australia?

Is a scanned Contract legally binding in Australia?

The short answer is YES, it can be. But first let’s cover off some other frequently asked questions surrounding contracts.

Do different countries have different preferences for scanned contracts?

In a recent LinkedIn group discussion with other lawyers around the world, different countries appeared to have different preferences regarding hard copies versus scanned/electronic copies of contracts.

Those countries happy with a Scanned or Electronic copy of a contract were:

  • Australia
  • France
  • India
  • Netherlands
  • Philippines
  • UK
  • USA

Those countries who preferred a hard copy signed contract were:

  • Chile
  • Indonesia
  • Nigeria
  • Mexico
  • Pakistan
  • Singapore

So, depending on where you are in the world, a scanned copy of a contract might not be your best form of contract.

Does a Contract Have to Be In Writing?

No.

Most of the time a contract doesn’t have to be in writing, as much as anyone might tell you otherwise. This includes those people who decide they can’t afford to pay for your services and say ‘I never signed the contract‘.

We’ve covered this question in more detail in another article about contracts.

Do you need a lawyer to write a valid Contract?

No.

Some people are very capable of identifying the core issues in a deal and documenting that clearly. Lawyers are trained to do this, but that doesn’t mean they are the only people capable, and in fact, we’ve seen some poor contracts written by lawyers as well.

Most contracts only need to contain three components to be legally valid:

  1. All parties must be in agreement (after an offer has been made by one party and accepted by the other).
  2. Something of value must be exchanged (such as money, services, goods or a promise to exchange such an item) for something else of value.
  3. All parties intend to create a legal relationship (rather than a joke or a bet in the pub).

It is legally valid to simply keep a written record of what has been agreed, preferably dated, keeping the following in mind:

  • There is less chance of arguments in the future if everyone involved checks that the words correctly state their agreement.
  • Getting a signature on a page can be used to demonstrate that the person signing agreed to what has been written down.
  • When writing your own agreements keep the words as straight forward as possible and avoid leaving blanks that could be filled in by other people at a later date.
  • Never sign a contract unless you completely understand what you are getting into (even lawyers can make this mistake).
  • Write down your initials next to any changes that are made to the contract.
  • Everyone involved should get a copy of the final contract, whether or not it is signed.
  • Get legal advice if you are not sure whether the contract properly reflects your agreement, or if you have any concerns about the agreement.
  • Don’t assume something is okay if you don’t understand what it means. It is better to be clear than confused and have problems later.

CAUTION

We have seen contracts written by people who do not have legal training. Sometimes they are good, sometimes they are bad.

Some consultants get hold of precedents and think they know how to amend them. This can create legal problems, rather than solutions.

We have seen a contract cobbled together by a marketing or business consultant that was overly complicated, contradictory and contained terms that simply weren’t relevant to the purpose of the contract.

Beware if the language is old fashioned with lots of Latin references or ‘heretofores‘ etc, then it’s probably an old document someone has copied and may contain references to law that has changed over the years.

 

Does a Contract have to be Signed to be binding?

No.

Some contracts – for instance where someone guarantees the repayment of another’s obligation – have legislation that requires signatures to prove that the contract is valid, but most common contracts can be completed without an original signature, particularly after the adoption of Electronic Transaction Legislation which provides for the enforcement of click wrap agreements and electronically signed agreements.

How can you tell if a person agrees when they haven’t Signed a Contract?

A party must be seen to agree to the terms of a contract in order for it to become legally binding.

You can be seen to agree to the terms of a contract even if you haven’t read it. Click wrap agreements – those links to terms and conditions with an ‘I agree’ check box online – are a prime example of contracts that people enter into every day without reading them. How many of you have read all of the terms and conditions applicable to your Facebook account? Not many for sure.

If you take an action that has been anticipated in the contract, even if you haven’t signed it, you may be seen to have acted consistently with the contract, and in compliance with it.

Though agreement can be demonstrated by the signatures of the parties, it is generally accepted that parties can enter into a contract by following the course of action set out in the agreement, which ‘proves’ their consent.

When drafting a service agreement for a business we will usually include a paragraph that makes the services terms binding, whether or not the agreement is signed by the client. This is because it is often difficult for businesses to get clients to return signed documents before starting work.

An example of the type of clause used might be:

This agreement will be binding on you as soon as you ask us to start work, unless you immediately ask us to stop providing Services to you, whether or not you sign it.

For contracts that do need a signature (like guarantees) it is highly unlikely that the contract will be found to be binding on a party if it is not signed.

Contract formalities

As a general rule contracts do not need to comply with any sort of formalities. Even if you have a written document that has been signed, a signature can be challenged with evidence from a handwriting expert, and we have been involved in a court case where this was done.

Court matters – litigation – are costly processes and one of the most costly phases of litigation is the called ‘discovery‘. During the discovery process, each party to a court matter is required to create a list of all documents that might have anything to do with the dispute, and prepare those documents in a format that the other parties can read.

Thirty years ago all the documents presented to court tended to be in paper form. Now, they are mainly electronic. Think of all those short ‘thanks‘ emails you have sent in the last year. If created as part of a conversation that is now related to a dispute, they are each separately discoverable in court proceedings. 

With the proliferation of email and other electronic messaging, electronic discovery has become almost essential to court proceedings. Electronic discovery is now an industry in its own right with analytics and processing to avoid human beings having to read every electronic document ever produced.

So, coming back to scanned copies of contracts and whether or not they are enforceable. The real question is –

Is the scanned copy of the document the best available evidence that the parties entered into a contract in the first place?

While having an original printed contract with hand written signatures available to prove the parties were involved would arguably provide the best evidence, it’s not the only method to prove that a legally binding agreement can be formed, and proven, between parties. If a paper copy is not available, the scanned copy probably is the best evidence.

How can Onyx Legal help you?

If your contracts need review, update, or you don’t have one yet, let us help you to create the best contract for your style of business to avoid unnecessary delays. We love writing contracts. Contact us so we can help you with your contract today.

GDPR and the impact of a ‘no deal’ Brexit

GDPR and the impact of a ‘no deal’ Brexit

GDPR and the impact of a ‘no deal’ Brexit

The UK is scheduled to exit from the EU on 29 March 2019

There are substantial negotiations underway for transitioning of legal, trade and other relations between the UK and the EU after Brexit happens. At this stage, many of the negotiations have been unsuccessful either within the UK’s own parliamentary system or between the UK and the EU. Without agreements for transitioning and new agreements for interacting with the EU, the UK faces numerous disruptions to trade, security, medicine availability, travel, workplace regulations and citizenship of UK citizens in other parts of the EU.

There are a few options between now and 29 March 2019.

The first is that a deal will be put together for transitioning. This would be the most favourable outcome for continuity of business transactions and commerce. The second is, if no deal can be agreed upon, the date of Brexit may be extended by agreement to allow more time for negotiations. The third scenario is what is being called a ‘no deal Brexit’.

What does a ‘no deal Brexit’ mean?

If no agreement for transitioning can be reached and the exit date is not extended, the UK exit from the EU will happen on 29 March 2019 and there will be a degree of chaos attached.

For the many laws and rules currently intertwining the UK within the EU, there will be no deals in place for transitioning and planning. This will affect many laws and current practices, however for the purpose of this article, we are only looking at the management of data under the GDPR.

Why is a ‘no deal exit’ important for privacy legislation and who would this effect?

Under the GDPR (General Data Protection Regulations), the UK is currently part of the EU however from 29 March 2019 (or later date if this is extended), the UK will be an independent country.

If a no deal exit happens, the transfer of data between the EU and the UK will be restricted under the GDPR from 29 March 2019. It is possible that the UK will be granted adequacy status (yes, that is a technical term), but this cannot be assessed until after the exit has happened (and will likely take several months). In the meantime, the transfer of personal information from the EU into the UK must be completed using a standard contractual clause (‘SCC’) in the format approved by the EU.

Sounds complicated? Let’s break it down and look at the implications: 

Location of business receiving personal data Scenarios and action required prior to 29 March 2019
Head office of business within the UK and collecting data from any person within the EU or monitoring the behaviour of any person within the EU

Examples:

  1. You operate any kind of online membership subscription service that has EU resident subscribers.
  2. You have an online retail store that is open for EU residents to make a purchase.
  3. You provide advisory services and have clients resident in the EU.
ACTION: Review your privacy policy, make sure SCC’s are in place with businesses within the EU that you deal with eg hosting, cloud storage.
If you process data of EU citizens and transfer this data to the US under the US privacy shield, you will need to look at your agreements with the US to ensure a SCC is added into each of these agreements as the US Privacy Shield will not work with the UK anymore.
Unless you have an office in the EU, you will need to appoint a privacy representative in the EU.
Head office of business within the EU (but not in the UK)Look carefully at where your data goes. There will no longer be a free flow of data from EU to UK. Do you transfer data to the UK? Data subjects will have to be told.

Head office of business outside of the UK and EU and collecting data from any person within the EU or monitoring the behaviour of any person within the EU

Not much changes here, you should already have in place a compliant GDPR privacy policy and SCC’s protecting the flow of data of EU citizens. A review of your privacy policy will be required if you rely on the US Privacy Shield for the transfer of data of UK citizens
Any business relying on the US Privacy Shield for the transfer of data in or out of the UKThere is a particular paragraph that needs to be added to the privacy policy of the US entity (yes, the wording is specific) to ensure that the privacy shield takes effect.

 

How can Onyx Legal help you?

We can help you work out if you have to comply with GDPR and prepare appropriate privacy and cookie policies to comply with GDPR requirements. Book a time to talk to one of our team to find out more.

Pause Before You Threaten Legal Action for Stolen Intellectual Property

Pause Before You Threaten Legal Action for Stolen Intellectual Property

Pause Before You Threaten Legal Action for Stolen Intellectual Property

Stop and Pause: being too quick to assert your Intellectual Property rights could land you in hot water

Do you think that someone is using your work in an illegal way? Stop and pause before you threaten them with legal action, as accusing someone of infringing your intellectual property rights may leave you in the firing line.

Law exists in Australia to protect people from making dubious claims in relation to patents, designs, copyright and trademarks. This extends to sending cease-and-desist letters, sending circulars and advertisements.

The idea behind this legislation is to stop rights holders from misusing their position.

For example, it may be easy to scare off a competitors by having lawyers draft a cease-and-desist that the competitor cannot afford to investigate, even if your competitor has not technically infringed your intellectual property.

A 2016 case of CQMS Pty Limited v Bradken Resources Pty Limited shows that if you wrongly allege infringement, the person you complained about may bring a claim against you.

In that case, CQMS alleged that Bradken had infringed a number of their patents. Their lawyers sent out a letter of demand, setting out the basis for their claim. The letter of demand was “fairly standard” and of the kind often sent by patent attorneys. When Bradken did not comply with their request, CQMS then pursued the claim in court.

CQMS lost the case and was then counter-sued by Bradken, who asserted that they had been the victim of an “unjustified threat”. The fact that CQMS had lost the case was evidence of the “unjustified threat”. It did not matter that CQMS firmly believed that they had a good case against Bradken and were prepared to follow it through in court.

Likewise, the 2016 case of Stone & Wood Group Pty Ltd v Intellectual Property Development Corporation Pty Ltd should serve as a warning to be careful. What you may think infringes intellectual property rights may not in fact, do so.

In that case, craft beer brewers Stone & Wood had a beer called “Handcrafted Stone & Wood Pacific Ale” and they alleged that competitor craft brewers Elixir had infringed their intellectual property rights by calling their beer “Thunder Road Pacific” and “Pacific Ale”.

Unfortunately, when filing court proceedings Stone & Wood claimed for passing off and contraventions of Australian Consumer Law, but did not include a claim for trade mark infringement in their original claim. Stone & Wood only added a claim for trade mark infringement after Elixir counter-claimed for groundless threats of legal proceedings for trade mark infringement resulting from the letters between lawyers before the claim was filed.  

The court found for Elixir, and said that the reactive amendment to Stone & Wood’s claim adding trade mark infringement only after Elixir made a claim fro groundless threats, served to support Elixir’s case.

These examples should deter you from firing off “cease and desist” letters without a careful strategy.

As it has not always been clear what a groundless claim or unjustified threat could be, in 2017 the UK Parliament passed the Intellectual Property (Unjustified Threats) Act to clarify the meaning. If a reasonable person believes that a communication contains a threat of legal proceedings to protect a registered trade mark as the result of an act done, that will constitute a threat of infringement proceedings. 

That threat will not be actionable if an infringement has occurred. Letters asking a person to cease and desist infringing behaviour will not be actionable if they identify the owner’s rights and do not threaten legal proceedings. 

At this stage, reform is not proposed in Australia.

What if someone is infringing your IP?

In light of the pitfalls noted in this article, what should you do if you think that someone is infringing your intellectual property?

1. Stop and pause

Take a deep breath before firing off any emails or letters to the other party.

Do not presume that just because your competitor is using similar words, colours or phrases that they are automatically infringing your intellectual property.

Do not send any kind of “cease and desist” communication unless you are genuinely intending to proceed with, and substantiate, the claim in court. Be aware that in some cases, if you fail in court, that is enough to establish an “unjustified threat”.

2. Check it out

Check what intellectual property rights you do have. Do you have all your designs, patents and trademarks registered? Are your claims valid in the country that you are asserting them? Just because you have rights in one country, does not mean you have rights in another.

Engage a lawyer who works in the area of intellectual property you seek to protect, if you are unsure about what rights you have.

3. Play if safe

If you believe that someone is close to infringing your intellectual property, there are some things you can do. You are allowed to notify another party that intellectual property in a particular design, patent or trademark exists.

We recommend getting a lawyer to look over any correspondence you intend to send, as there are scales of what is considered a threat.

What if you receive a cease and desist letter?

1. Don’t panic

Being on the other end of a cease and desist letter can be frightening, especially if the other party is speaking about pursing a claim in court.

Remember, these letters are not a summons to court.

Take a deep breath and take time to properly assess what is being asked of you. Don’t rush to pull down all your advertising material or respond with a knee-jerk reaction.

Letters from lawyers in your country should be taken seriously, but there are a variety of options available.

2. Read the letter

Read their communication with care to find out exactly what the other party asking you to do.

Are they talking about trademarks? Copyright? Or other contractual matters? Are they asking you to remove certain material? Or are they just asking for information?

Do they want a response by a certain date? Do they want you to remove the whole part of something, or just make minor changes?

3. Speak to a lawyer about whether a valid claim exists

Intellectual property law can be complicated, with varying degrees of permitted use.

Using similar colours and phrases will not automatically infringe someone’s intellectual property rights.

4. Do nothing

Unfortunately, operating in the public arena opens you up to allowing anyone to contact you. Some people like to act aggressively with the intent to intimidate you or disrupt your business practices. In a case like that you might simply respond that you disagree with their position, or not respond at all. 

Be careful if you choose not to respond to a letter, particularly if it is from a lawyer within your country. If there is a chance you are infringing someone’s intellectual property rights then you could be at risk of further proceedings. 

If there is a chance the claim is valid – address it immediately and do not hide it at the bottom of you to-do-list in the hope that it will go away. In most cases, it usually does not!

5. Comply

After reading the letter and seeking advice, it may be that you decide to comply. This will probably be the easiest and most cost effective solution.

However, you should consider the consequences of doing so. Will you have to change your whole business strategy? Will it cost a lot to make the required changes?

How can Onyx Legal help you?

We can help you assess the risk of action you want to take in response to a threat of action claiming your infringement, or if you want to issue a letter notifying another party of their infringement.

Once we have properly assessed your position, we can work with you to develop an appropriate strategy to move forward in the way that best suits your position.

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